What impact will Chris Bowen's gas review have on ASX explorers?
The federal government now plans to apply a similar model to the east coast
What impact will this have on ASX gas players on the east coast? We tap MST Access energy analyst Saul Kavonic to give us a breakdown of possible scenarios
Gas reservation – the retention of a percentage of a gas development's reserves for domestic use – has been a feature of Western Australia's energy picture for nearly two decades and the federal government, via Minister for Climate Change and Energy Chris Bowen, is now looking to do the same in the eastern states.
The policy has been credited with ensuring comparatively lower gas prices in WA, which had required offshore fields to set aside 15% of their gas for domestic use.
While wholesale gas prices in the state have increased significantly since 2020 when the state government allowed onshore fields to export gas, it remains lower than over in the east with Santos (ASX:STO) reporting realised prices of about $8.24 per gigajoule during the first quarter of 2025.
This compares with the average gas price of $13.26 per gigajoule on the east coast during the same period, according to the Australian Energy Market Operator (AEMO).
Anthony Albanese's Labor government is now hoping that a similar gas reservation scheme could increase domestic gas supplied as it stares at the potential for shortfalls in 2029.
Gas policy shake-up
For ASX small cap gas players operating on the east coast, implications will vary depending on the details of the reservation policy and how it is executed.
Speaking to Stockhead, MST Access energy analyst Saul Kavonic said that if the government simply introduces a forward-looking gas reservation policy for new fields, it's unlikely to shift the dial much for the east coast gas market.
But if the government goes down the more aggressive pathway, applying the policy retrospectively to existing projects, Kavonic said it would artificially push more gas into the domestic market for a period of time.
'And that would put some downward pressure on pricing,' he said.
'Even in that scenario, we are still likely looking at double digit gas prices at the very low end, so for the small east coast producers, both the demand and the pricing outlook still appears like it will remain supportive.
'What it will do for those domestic players is drastically limit their market routes by cutting off export of the volumes as an option, and particularly for those players where exports would be the most natural market, that could potentially reduce the availability capital and joint venture approvals for them to proceed.'
Another potential benefit for small-cap producers on the east coast is if the policy is structured to incentivise domestic gas development by allowing new gas supply to offset reservation obligations, Kavonic said.
'The policy could open up opportunities for small-cap producers, as LNG players may look to support their projects in order to secure the domestic gas volumes required under the new framework,' he added.
'The risk lies in the government calling it a prospective policy, but then defining it to include new fields, expansions, and third-party supply in a way that effectively makes it retrospective – impacting existing assets and operations.
'I think the government wants to pursue this in a way which encourages more supply, which is in line with the Future Gas Strategy and the statements being made by the Prime Minister,' Kavonic said.
'If they get the settings right, it could see a boost for small independent suppliers as the LNG projects would be incentivised to support and fund them.'
But if the government doesn't get the policy right, it could end up doing more harm than good, discouraging new gas supply and making the market situation worse.
Testing trade relations
Over the past few years, the Australian government's intent to increase supply has tended to backfire.
Since 2022 when the Labor government introduced its gas policy, relations with our international trading partners – including Japan – have been impacted.
Now, the Albanese government's move to consider an east coast gas reservation is adding even more fuel to the fire, and reportedly causing concern in Japan – a country where securing LNG supply is a national security.
WA Premier Roger Cook has flagged serious trade concerns from Japanese stakeholders over the potential east coast gas reservation policy, following meetings with senior government and industry officials during a recent visit.
Gas thirst could fuel growth
Regardless of what happens in regard to the reservation policy, the hunger for gas supplies could be a benefit for Advent Energy – an unlisted company that's 36% owned by BPH Energy (ASX:BPH).
Advent continues to maintain that its PEP 11 permit in the offshore Sydney Basin is in force with respect to matters such as reporting, payment of rents and the various provisions of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and is currently seeking a judicial review.
PEP 11 could host multiple trillion cubic feet of gas, which could go a long way towards meeting east coast gas demand.
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